CIMB Securities has initiated coverage on Eco-Shop Marketing Bhd with a HOLD call and a target price of RM1.50, saying the fixed-price retailer has a strong growth setup but much of its potential is already reflected in its valuation.
CIMB Securities expects Eco-Shop’s core net profit to grow at a 16.2% compound annual growth rate between FY26 and FY29, driven mainly by store expansion, modestly positive same-store sales growth and resilient margins.
The research house said Eco-Shop’s network had reached 462 outlets by FY26, with about 97% operating under its RM2.60 fixed-price model. It viewed the retailer as a key beneficiary of consumer downtrading as inflation keeps shoppers focused on value.
House brands accounted for 60% of sales in FY26, up from 40% for third-party brands, helping gross profit margin reach a record 33.3% compared with 19.6% in FY22.
CIMB Securities expects Eco-Shop to add 95 stores in FY27 followed by 80 stores each in FY28 and FY29. This would translate into a 15.8% three-year store expansion compound annual growth rate.
However, the research house said the fixed-price model also leaves Eco-Shop more exposed to inflationary pressures. It expects gross margins to remain around 33% to 33.5% through the forecast period.
CIMB Securities derived its RM1.50 target price using 25 times CY27 forward earnings, in line with its valuation for MR DIY. It said successful store rollouts, sustained positive same-store sales growth or a scalable second retail format could provide upside, while weaker sales growth or margin pressure remain key risks.
As of 10.41 am, the stock price was flat at RM1.50.
